Hexpol (Buy, TP: SEK123.00) - Undervalued earnings growth

We reiterate our BUY but have cut our target price to SEK123 (130) after lowering our 2021–2022e adj. EBIT by 3–0% as a result of short-term supply-chain issues. We still find Hexpol well positioned for sound earnings growth from its sector-leading recovery and undervalued compounding case, and forecast a 2021–2023 EPS CAGR of 9%, while M&A in line with its 5-year track record would offer 10% upside to our base case 2023e EPS. The stock is trading at a 2022e P/E of 15.5x, a 10% discount to its 5-year average.

Hexpol (Buy, TP: SEK130.00) - Stay cool with Hexpol

After beating adj. EBIT margin consensus for the fourth quarter in a row, we believe Hexpol has proven its tight cost control and investor concerns about margin dilution from raw materials costs should ease. We like its sector-leading organic growth and margin recovery, set for a 2020–2023e EPS CAGR of 19%, and believe the M&A option is undervalued and could offer a re-rating of the stock. We reiterate our BUY and have raised our target price to SEK130 (120).

Hexpol (Buy, TP: SEK120.00) - Set to rub it in

We believe the Q2 results could prompt 3–4% positive estimate revisions for the coming years, as we are 16% above consensus on Q2 adj. EBIT. Consensus is for an 8% QOQ sales decline while we forecast a 6% increase, from: 1) 3% QOQ growth in weighted LVP production; 2) ASPs set to rise QOQ to offset higher raw materials costs (synthetic rubber +11% YOY in Q2 after -2% in Q1); and 3) fully integrated acquisitions, which could add 2% QOQ sales growth. Our 2021–2022 adj. EBIT forecasts are unchanged, and we reiterate our BUY and SEK120 target price.

Seafood - Fat Trout Weekly

Seafood - Fat Trout Weekly

Seafood - Fat Trout Weekly

Seafood - Fat Trout Weekly

(2 pages)